Canadian Dollar Update August 14, 2019 – Canadian Dollar on a yo-yo
USD/CAD Open: 1.3222-1.3223 Overnight Range: 1.3210-1.3316
Oil is at $55.16 and gold is at $1,526. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3337. Support is at 1.3262.
The Canadian dollar bounces up and down like a yoyo on a string. President Trump announced that he would delay some of the planned tariffs on China, from September 1 to December 15. The news triggered a stampede out of safe-haven trades, and the Canadian dollar benefitted. USDCAD dropped from 1.3288 to 1.3188 yesterday. The move didn’t last. Prices climbed steadily overnight, and the currency pair is back at 1.3285 in Toronto, this morning.
Mr. Trump’s comments were followed by a press release from the US Office of the Trade Representative. It said “Certain products are being removed from the tariff list based on health, safety, national security and other factors and will not face additional tariffs of 10 percent. Further, as part of USTR’s public comment and hearing process, it was determined that the tariff should be delayed to December 15 for certain articles. Products in this group include, for example, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”
The US dollar was already under pressure after July inflation data, which was higher than expected, suggested the Fed would be less aggressive in cutting interest rates. The US/China trade news exacerbated the move. USDJPY screamed higher, rising from 105.15 to 106.95 as safe-haven trades were unwound. US bond prices plunged, and stocks on Wall Street recouped all of Monday’s gains. Gold and oil prices dropped, and the Canadian dollar went along for the ride.
Asian markets opened on a positive note. The Australian Westpac Consumer Confidence Index rose to 3.6% compared to -4.1% previously, giving AUDUSD a lift. However, the mood soured. Chinese Retail Sales and Industrial Production data for July, were worse than expected and the rally became a retreat.
USDJPY retreated on the China news and has retraced almost half of yesterday’s move, in part because US Treasury yields returned to yesterday’s low.
EURUSD traded steadily despite the trade news drama and weak economic data. Headline German Q2 GDP q/q fell 0.1% compared to the 0.4% gain previously. Analysts warn that the country is nearing recession territory. Eurozone data wasn’t much better. Q2 GDP was 0.2% as expected, but Industrial Production and employment data were weaker than forecast. However, the latest drift towards risk aversion sentiment helped offset selling pressures from the weak data.
GBPUSD got a temporary boost from a jump in inflation to 2.1% y/y in July from 2.0% y/y in June. PPI data was steady, and the DCLG House Price Index was a tad lower. The rally ended when Boris Johnson said he would not compromise in the Brexit deal-making a “no-deal” Brexit more likely.
There are not any Canadian economic releases today, and the US data is second-tier and not a factor for FX markets.
Today’s Suggested Range USD/CAD: 1.3220 – 1.3320